How Do Chip and PIN Cards Differ From Chip and Signature?

Q: What’s the difference between chip and PIN and chip and signature credit cards? I’m traveling abroad soon and I want to make sure I’m using the safest option.

That’s a great question. While the United States still uses magnetic stripe card technology developed in the 1970s to process debit and credit card transactions, many parts of the world – including Canada, Mexico, Europe, South America and Asia – use what’s called “chip and PIN” technology, a brand name for EMV smart cards.

How does a chip and PIN card work?

The customer inserts their credit or debit card into an EMV reader instead of swiping a magnetic stripe. While the card is in the card reader, the user enters their PIN number to verify the transaction instead of signing for it. The process is similar to inserting a debit card into an ATM and punching in a PIN to withdraw cash. Unlike some ATMs, however, the chip and PIN card remains within the card user’s sight while it’s inside of the reader.

So what’s a chip and signature card?

The U.S. is attempting to play catch up with the rest of the world, as American banks plan to issue chip and PIN cards to customers on a wide scale sometime in 2015. Until then, however, Americans will mostly be using the magnetic stripe cards we’ve been accustom to for the past two generations.

Many U.S. banks have begun issuing “chip and signature” cards to customers in a transitionary phase before the chip and PIN cards roll out. Don’t worry; they still have a magnetic stripe, which means they can be used the same way as your current card.

Chip and signature cards work in a similar manner to their chip and PIN cousins. Instead of entering a PIN number to complete a transaction after inserting your card into the EMV reader, the customer signs their name – just as they currently do with the magnetic stripe cards.

Chip readers are starting to appear in the United States. The hope is by next year the majority of merchants will accept chip and signature as well as chip and PIN cards and quickly replace the magnetic stripe system.

What if I’m in a country that only accepts chip and PIN cards?

Using magnetic stripe cards in the U.S. isn’t a problem. However, using them in foreign countries can prove to be difficult in certain situations, considering most foreign merchants primarily accept chip and PIN and chip and signature cards. Luckily, most merchants in major cities throughout Europe and Asia still accept magnetic stripe cards.

Even though chip and signature cards are widely accepted at most merchants, users of these cards may encounter a small hiccup. Many chip and signature cards will not work at automated pay stations, such as a train ticket kiosk or gas pump. It’s even less likely to work with a magnetic stripe card. There’s usually an employee nearby, however, who can process the transaction for you, but if it’s late at night and no one is working, you might be out of luck.

It’s important to know that the PIN you receive with your chip and signature or magnetic stripe credit card in the U.S. to make cash advances at an ATM will not work if you try to type it in at a foreign EMV reader. The technology isn’t compatible, so you’ll need a chip and PIN card to complete your transaction.

Should I get a chip and signature card?

Even if you don’t intend to leave the country anytime soon, most merchants in the United States will adopt EMV terminals by the end of next year. That means your chip and signature card will be accepted, along with chip and PIN cards. The process should be painless, as banks will begin sending out EMV cards to their customers to prepare them for the change. You can also call your bank and request an updated card.

If you plan on traveling abroad within the next few months, it may be a good idea to get either a chip and signature or chip and PIN card so you can use your card with ease. There are a number of good travel cards with this technology. Plus, if you find yourself in a small town in Europe or Asia off the beaten path, it’s best to carry cash and have an updated card with you, because the merchant might not accept magnetic stripe cards.

Leave a Reply

Thank you for your comment! It's currently being reviewed by our editors.

These responses are not provided or commissioned by the credit card issuer. Responses have not been reviewed, approved or otherwise endorsed by the credit card issuer. It is not the credit card issuer's responsibility to ensure all posts and/or questions are answered.

About Author

Jonathan Roisman

Jonathan is a NextAdvisor Content Manager who covers credit monitoring, credit cards, savings accounts, web hosting, tax services, auto insurance, audiobooks and online meeting software. He previously wrote for J., the Jewish news weekly of Northern California and has been published by Huffington Post, SF Weekly, and San Francisco Giants Magazine, among others. He is a graduate of San Jose State University, and currently resides in the San Francisco Bay Area. Follow him on Twitter @JonAdvisor.

Advertiser Disclosure: NextAdvisor is a consumer information site that offers free reviews and ratings of online services. Many of the companies whose services we review provide us compensation when someone who clicks from our site becomes their customer. This is how we make money to support our site. The results of our analyses, calculators, reviews and ratings are based on objective quantitative and qualitative evaluation of all the cards on our site and are not affected by any compensation NextAdvisor may receive. Compensation may impact which products we review and write about and where those products appear. We do not review all products in a given category. All opinions expressed on this site are our own.